Biotech Values

[DewDiligence]

Here’s more on Barry Sherman and the Plavix
soap. BMY’s Peter Dolan has emailed employees
warning of layoffs if Apotex prevails. No wonder
some people are jumpy about this story.

http://www.nytimes.com/2006/08/15/business/worldbusiness/15drug.html

>>
A Generic Drug Tale, With an Ending Yet to Be Written

August 15, 2006
By STEPHANIE SAUL

The opening chapters of a draft autobiography sit amid the hundreds of pill bottles and mound of legal documents in Bernard C. Sherman’s office. [Isn’t this exactly what you would expect from him?] It will be the story of a brainy kid born in Toronto who becomes Canada’s richest generic drug mogul.

Though a work in progress, it has the makings of a page turner. One chapter will recount how an employee from a brand-name drug company offered to sell him secret files. Another, he says, will describe how Mr. Sherman caught a rival stealing the recipe for a blockbuster generic developed by his company, Apotex.

But what promises to be the book’s most riveting chapter is still unfolding. It is the part where Mr. Sherman seemingly outsmarts two big drug companies, Bristol-Myers Squibb and Sanofi-Aventis, to market the first generic form of the big-selling drug Plavix five years before its patent expires. And it could conceivably end with someone in jail. [BMY’s CEO, Peter Dolan, perhaps.]

“They couldn’t see that maybe certain things were going to end them up in prison,” Mr. Sherman said last Friday during an interview in the Toronto building where his generic Plavix copy is being made.

Despite his reputation as a shrewd, combative businessman, Mr. Sherman looks every bit the scientist with wiry gray hair, glasses and a pallor suggesting he rarely spends time outdoors. His white lab coat bears his nickname, Barry.

The Justice Department is investigating whether Bristol-Myers and Sanofi tried to conceal from authorities part of a deal they were negotiating with Mr. Sherman to settle a lawsuit to decide the validity of their patent. That deal, subject to federal and state approval, would have preserved the companies’ lucrative monopoly for five more years and kept Plavix prices high.

Mr. Sherman contends — and letters he mailed to Congress in July seem to support him — that he negotiated the settlement on the assumption that the Federal Trade Commission and state attorneys general would never approve it. Mr. Sherman says he negotiated only to extract favorable concessions from Bristol-Myers and Sanofi that would take effect even without the government’s approving the deal.

Leveraging those concessions, Mr. Sherman’s company began shipping its version of Plavix in the United States last Tuesday, after government regulators did indeed reject the patent settlement.

By the end of last week, Mr. Sherman said that hundreds of millions of dollars’ worth of his generic Plavix was on the United States market, potentially undermining the brand-name product, which had American sales of $3.5 billion last year.

Apotex’s generic version is selling for about 10 to 20 percent less than typical $4-a-day Plavix, which is widely used to prevent recurrences of heart attacks and strokes. Bristol-Myers announced yesterday that the company was giving rebates to its customers in an attempt to counter Apotex’s generic price [LOL].

Bristol-Myers and Sanofi, which say they have done nothing improper, filed for an injunction against Apotex in federal court in Manhattan yesterday, seeking to block further sales of the generic drug.

In an e-mail message to Bristol-Myers’s 43,000 employees worldwide, the chief, Peter R. Dolan, said that if the legal steps failed to protect the Plavix patent, the generic incursion might jeopardize financing for additional clinical trials of the drug. It could also lead to “potentially irreversible price decreases, customer good will impact and potential layoffs,’’ Mr. Dolan wrote.

A Lehman Brothers analyst, C. Anthony Butler, said yesterday that Bristol and Sanofi had a better than 50 percent chance of winning the court injunction. But Mr. Sherman insists that the odds are in his company’s favor.

In an interview at Apotex’s stainless steel and glass headquarters in Toronto, Mr. Sherman declined to provide many details about the investigation, saying he expected to testify before a federal grand jury in Washington in September or October.

But he hints that there are incriminating e-mail messages and maybe other documents that may be the reason federal agents searched Bristol-Myers’s offices on Park Avenue in Manhattan last month.

In a court hearing on Aug. 4, a lawyer for Bristol-Myers and Sanofi, Evan R. Chesler, accused Mr. Sherman of sabotaging the patent deal by giving false information to the government, which set off the criminal investigation.

“All I know,’’ Mr. Sherman said, “is whatever I’m saying to the authorities is the truth and the whole truth.”

Meanwhile, high-volume production of clopidogrel, the generic name for Plavix, is continuing at Apotex’s headquarters and at another sleek manufacturing plant in Toronto. In 13 hours last Friday, the company’s mechanized manufacturing line churned out four million of the pink tablets.

As the founder of Canada’s largest pharmaceutical company, with more than 5,000 employees, Mr. Sherman is among the country’s richest men with a net worth that magazines estimate at nearly $4 billion. He and his wife, Honey, give millions to charity each year. The Shermans have four children, two who say they are interested in joining the business.

“I don’t even know what I’m worth,” Mr. Sherman said. “It’s a private company.’’ But he added with a wry smile: “It’s worth more today than it was last week. I can tell you that.”

Mr. Sherman said that his company’s sales, more than $1 billion last year, could almost double if the marketing of generic Plavix went well.

Mr. Sherman, 64, grew up in Toronto and studied at the Massachusetts Institute of Technology, receiving a doctorate in astronautics. But he had no career plan.

“I was lost in terms of what I wanted to do,” he said.

He decided to follow in the footsteps of his uncle, who had a small generic drug company in Canada and died while Mr. Sherman was at M.I.T. After acquiring and running his uncle’s company, he started Apotex in 1974 in a 5,000-square-foot building with used equipment.

“The first tablet press was bought used for a couple hundred dollars,” Mr. Sherman recalled. “I did everything in those days from cleaning the floor to writing the checks.”

Yet, the climate for generic drug makers was hospitable in Canada, with its universal health care programs. A compulsory licensing law made it easier for generic companies to manufacture and sell medications that were still under patent.

In 1980 Apotex became the first company to sell a generic version of Inderal, then a popular drug for high blood pressure and heart problems.

“That gave us the funds necessary to invest and to continue to grow,” Mr. Sherman said.

Another big step came in 2003, when the company was the first to market a generic form of Paxil, the antidepressant sold by GlaxoSmithKline. That was an “at-risk launch,” industry jargon meaning that the generic company sells its drug before patent litigation is concluded.

Mr. Sherman’s company ultimately won the Paxil patent litigation. The episode gained him a reputation as someone who was willing to expose his company to large financial damages in the event he lost a patent case.

In one of the concessions he wrested from Bristol-Myers and Sanofi, though, the companies agreed to waive their right under federal law to seek triple financial damages if they should ultimately prevail against Apotex in the Plavix patent dispute.

Mr. Sherman is no stranger to controversy. In 1995, an offshore mail-order drug company tied to Mr. Sherman ran afoul of United States regulators for selling drugs in the United States without approval. The company pleaded guilty to shipping unapproved drugs and was fined $500,000. Mr. Sherman says that his only role in the company was to supply the drugs and that neither he nor Apotex did anything unlawful.

In 1998, a University of Toronto physician who was conducting clinical research on an Apotex drug to treat a rare disorder called thalassemia accused the company of suppressing results that indicated problems with the drug. Mr. Sherman agreed to be interviewed on “60 Minutes” to defend his company.

Because the broadcast segment included Mr. Sherman calling the researcher “nuts” on camera, it is still referred to within Apotex as the “60 Minutes debacle.” But the Apotex drug, deferiprone, has now been approved in more than 30 countries.

For Mr. Sherman, getting generic Plavix and other products on the market seems to have become something of a crusade. While many other generic companies are cutting financial deals with brand-name manufacturers that keep generics off the market and extend the brand monopoly, Mr. Sherman says he is against such deals.

“I get steamed by those sort of things,’’ he said. “We’re working hard to bring things to market and we’re getting all these games played.”

D’Arcy Jenish, a Canadian journalist who wrote an industry-authorized book, “Trials and Triumphs,” about Canadian drug makers, says that Bristol-Myers and Sanofi should have been warier about negotiating with Mr. Sherman.

“Barry would never be in cahoots with the brands,” Mr. Jenish said. “I think he passionately believes that what he’s doing is bringing lower-cost prescription drugs to the public, and if he doesn’t, nobody else will.”

Mr. Sherman has been involved in litigation with Bristol-Myers and Sanofi since 2002. But it was not until early this year, after the Food and Drug Administration approved Apotex’s formulation for generic Plavix, that the brand-name companies sought to negotiate in earnest.

In March, the parties announced a deal in which Bristol-Myers and Sanofi would pay Apotex a minimum of $40 million and give the company the right to sell generic Plavix months before their patent was set to expire in 2011.

Mr. Sherman said it was because he never believed the deal would be approved that he insisted on concessions if it was not.

His main goal, he said, was to reduce the sizable risk that generic companies typically face when they sell at risk — namely, the threat of triple damages, based on three times a generic drug’s sales.

Bristol-Myers and Sanofi negotiated away most of that threat, agreeing to limit damages to 50 percent of Apotex’s sales if their agreement was rejected.

The companies also agreed to give Mr. Sherman five days on the market before they would seek a preliminary injunction to stop him, giving Apotex time it has used to flood drugstores with its version of Plavix. A hearing on that request for an injunction is scheduled for Friday.

Mr. Sherman’s contention that he had not expected regulators to approve the patent settlement is supported by a letter he wrote to three United States senators on July 7, criticizing the growing tendency of generic makers to cut deals with big drug companies.

“Before turning to the essential point of this letter,” Mr. Sherman wrote, “I must comment on the well-publicized perception that Apotex has entered into an anticompetitive settlement with Sanofi/BMS concerning clopidogrel (Plavix). That perception is incorrect. Apotex has negotiated only to remove barriers to immediate launch. To achieve that objective, we entered into a somewhat bizarre arrangement that will enable immediate launch, if and when F.T.C. refuses to approve a settlement.”

The letter — addressed to Senator Charles E. Grassley, Republican of Iowa, and the Democrats Charles E. Schumer of New York and Herbert H. Kohl of Wisconsin — accurately predicted that the refusal would come within weeks.

The whole story will be in his autobiography, Mr. Sherman says, or it might emerge sooner, as the facts unfold about Plavix.

“In due course,’’ he said, “you’ll have it all.”
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